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Beating the system?

15 May 17

Will the revamped Faculty of Advocates arbitration service, initially focusing on PI claims, prove a hit? The Journal asked two senior counsel involved with the scheme, why they think it might

by Peter Nicholson

Headlines were made early in the year when the Faculty of Advocates announced the launch of a new model scheme for taking personal injury cases to arbitration. But how much is really new, what might the advantages be, and why focus on PI claims?

For answers the Journal caught up with Angela Grahame QC, Vice Dean of Faculty, who has been driving the scheme forward, and Ruth Crawford QC, current convener of the Faculty Dispute Resolution Service (FDRS), which since 2011 has offered the services of suitably qualified counsel as arbitrators, expert determiners, adjudicators or mediators for those seeking non-litigious ways of resolving a dispute. Grahame, a PI practitioner, first became aware of the potential of PI arbitration some time before her election as an office bearer. Once in post, she explains, it came to mind again in the context of court reform, as advocates, and some solicitor firms who prefer to instruct counsel, pondered whether sanction for counsel would commonly be given in sheriff court PI cases.

What is actually new? As Grahame herself points out, PI arbitration was previously adopted in dealing with claims following the Piper Alpha disaster, and FDRS is available for any kind of dispute that people choose to refer to it. But Crawford admits that takeup has been fairly low to date, and while the wider popularity of arbitration in Scotland is hard to ascertain (a project is currently seeking to obtain a more accurate picture), anecdotal evidence suggests that despite the modernising 2010 Act, it remains a minority pursuit.

Both indeed believe that, surprising as some may find it, there remain many solicitors who are unaware of the availability of arbitration and its potential for clients. “We have a litigation culture,” Crawford notes. “Solicitors know about litigation whether they engage in it or not, and the court rules are published and online and you can see what’s involved.” Whereas, as Grahame says, “One of the benefits of arbitration is it’s completely flexible, bespoke, it can relate to the client, but that means for solicitors and even for counsel, you have to put a bit more thought into what might benefit your client and discuss it, because it’s not simply a wholesale adoption of the court rules.”

Rush to sign up

What is changing is the development of an online platform to support cases referred to Faculty – to be organised and controlled by the arbitrator but available 24/7 to both parties – allied with an upsurge in interest among members in arbitration and in achieving the accreditation. The Scottish Government supports arbitration, and Faculty is meeting with other interested professional bodies and the Scottish Arbitration Centre, with a view to collaboration.

Setting up the platform has proved a more complex task than anticipated, with late July rather than May now being targeted for taking pilot cases via the platform. As for member interest, Grahame comments: “I thought if I could get five or six people signed up in January we would be doing well, because this is quite a new thing for us. But 35 signed up for it and have now done the exams, and more will start in September, so we are now getting quite a body of advocates who are all much better educated about arbitration, and they are speaking not just to solicitors but also to clients.”

Training comprises an intensive 11-week course in international arbitration law at the University of Aberdeen. Completion leads to membership of industry-standard body the Chartered Institute of Arbitrators.

Hence the online platform, while a central feature of this year’s relaunch, is not a precondition of Faculty being able to accept referrals. Grahame tells of a senior colleague instructed in a high profile case who, on the day of our meeting, was in a consultation discussing whether to take it to arbitration. “Now that he knows about it in a lot of detail, having just sat his exam, he can see that there would be significant benefits to that client. So education for us has really been key, because not only are all the advocates talking about it: even if they speak to one or two solicitors, one client, that is getting the word out there.”

When to switch

But why PI cases? Have the Coulsfield (chapter 43) rules not resulted in an efficient case-handling system that delivers settlement without proof in all but a small percentage of actions raised? In fact, word has it that there are some issues with the new Personal Injuries Court, in terms of getting a diet, while for those cases still in the Court of Session, “if you want more than four days, you will have to wait at least a year and a half, probably two years for a diet, and then there is a problem of availability of judges, so parties turn up in the morning and they are sent away because judges aren’t available to hear it,” Grahame says. She adds: “I know the courts are trying to resolve that, and I don’t want to criticise the courts or say these are issues that cannot be resolved in the future, but they are things that people are concerned about.”

By contrast, arbitration would permit parties to choose both their arbitrator and the date on which the hearing should go ahead. “They can take an action up to the point of the record; they then sist it, they don’t wait indefinitely for a diet, they go to arbitration and the whole case is resolved within six months, eight months or a year. They are not having to explain to a client, that’s just the way it is, and it will go quiet for a couple of years, with the risk that even then there won’t be a judge to hear their case on the date set. Clients like that approach. And they quite like the idea that you don’t have to have one person: you could have a panel of three, who don’t all need to be lawyers. It’s just letting people know what the benefits and options are; they get much more control with arbitration than they ever do with court.”

That does not mean, however, that cases would necessarily still begin life in court. “When I started thinking about it initially I thought people would opt out of litigation and simply say let’s get an arbitrator appointed,” Grahame explains. “I thought that would be a more attractive option, that they have one person appointed that they have faith in, there would be continuity for the whole process. But actually as we’ve discussed this with solicitors, some of them have said to us we actually think litigating, record, sist, then going to arbitration might be our preferred option.”

Crawford follows up: “The whole process is completely flexible, so it’s how they think our profession could work for them. We don’t, at least I don’t, have a particular model, unlike a court action which proceeds in a certain way according to a prescribed framework. Arbitration is completely different from litigation; one has to try to forget about the litigation model and see if arbitration can be adapted and flexed in a way that might fit.”

They have seen this as solicitors in other fields are bringing their perspectives on how arbitration would work for them.

Possible downsides?

Returning to one of the drivers for the scheme, solicitor firms who like to instruct counsel, how likely is it that they would recover the cost under arbitration? Indeed, what are the prospects for cost recovery more generally?

“That’s the joy of arbitration: it’s party autonomy, parties can decide themselves whether they agree to counsel being instructed,” Crawford responds. “If they can’t agree, the arbitrator decides whether or not counsel should be a recoverable cost.”

Grahame recognises: “Cost is a big issue for solicitors, because they are interested in whether this will mean they get less business and less in fees. They worry that they cannot make judicial recoveries. But I think that’s a fundamental misunderstanding about arbitration. If they want to agree Court of Session expenses they can do that as a condition of entering into the arbitration. If they want to get sheriff court expenses with sanction for counsel, they can agree that. If they want to litigate up to the record, get judicial expenses for that, then go to arbitration, they can. If they want to cap the hourly rate, if they want to have a global sum, they’ve got complete flexibility.”

Another apparent drawback is the arbitrator’s comparative lack of powers to order recovery of documents. But the options available include freedom of information requests, already commonly used by PI solicitors; mandates; petitions under the Administration of Justice (Scotland) Act 1972, perhaps more common outside the PI field; and chapter 100 of the Court of Session Rules (applications relating to arbitration proceedings).

Crawford also notes the arbitral procedure of a Redfern schedule, comparable to a specification of documents, on which the arbitrator rules: “The arbitrator can also order sanctions; they can’t compel performance but there can be sanctions for not producing something which the arbitrator says should be produced. So there are a number of ways to recover documents, and ultimately you can go to the court.”

Does it not also restrict rights of appeal? “In PI cases that’s not likely to make any difference, frankly,” Grahame replies, “because the cases which go to appeal are few and far between. The majority are funded speculatively, and if decisions are based on credibility and reliability of witnesses they are not being appealed. So if, as I understand, arbitration can be appealed for error of law or some fundamental issue, it’s not dissimilar to the situation that exists now.”

Going further, Crawford suggests that some pursuers, and defenders, “might think that is an advantage because you get certainty and finality. If you go to arbitration, get your arbitral award, that’s it, you move on. I do know some people see that as a benefit rather than a disadvantage”.

Better control

All that said, published reaction from solicitors’ firms to the initial announcement was somewhat mixed. Grahame however reports receiving more messages challenging the doubters, as well as others simply curious to know more. “I say to people, we don’t have all the answers; it’s at a very early stage for Faculty, but this is what we’re doing. And it’s enough, I’m happy to say, to spark people’s interest and curiosity.”

For Crawford, “It’s been helpful that we’ve had this press comment, because obviously it’s encouraged us to think more deeply about our plans. It’s good that we’ve been challenged and asked questions.”

Are there positive incentives for solicitors to use the service? “Client management is a problem with the current court system,” Grahame claims, “in terms of dealing with your client, explaining to them why they have to wait for long periods for a date, why you don’t have a judge, why the judge or sheriff doesn’t have the experience in your field that you would like them to have: these are issues that solicitors deal with every day in PI. I think they would have happier clients, frankly. In terms of other things, I think just having control – the solicitor has more control.”

Again, “One of the problems with chapter 43 procedure, or equivalents, is there are quite extreme sanctions. You will know about Moran v Freyssinet Ltd 2016 SC 188, where the defenders failed to lodge a statement of valuation of claim, and decree was granted against them on the morning of the proof – undoubtedly a very serious sanction. There have been other cases like that where parties have not complied with chapter 43 and a serious sanction was imposed, with serious expenses implications, and how do you explain that to your clients?”

Just an alternative

How many cases, then, does Faculty believe it might be able to divert from the courts? “I don’t see it’s possible for me to say how many or what proportion,” Grahame answers. “Because it’s not just PI cases we’re doing, and we’re not trying to get every PI case. And I can’t really answer that because I don’t know how many solicitors are interested in sending us cases once we get the scheme up and running.

“It is not as if we are saying we want all the PI cases to be arbitrated. That just couldn’t be done. But what we want to do is provide a credible and viable alternative for people who cannot resolve their disputes and are unhappy about the courts, and at the moment there isn’t one.”